DOJ to AT&T: No FCC petition, no merger

The U.S. Department of Justice has sent a clear signal to AT&T(s T) that it doesn’t like the operator’s tactics in its ongoing quest to buy T-Mobile. DOJ lawyers told a federal judge Friday morning that it plans to file a motion next week to postpone proceedings in the government’s antitrust case against AT&T-Mo until AT&T resubmits its merger application with the Federal Communications Commission, Dow Jones reported. If AT&T won’t play ball with the FCC, then the DOJ won’t play ball with AT&T.

In November, AT&T yanked its merger petition from the FCC’s docket, just as the commission was getting ready to vote on the merger. Sensing the tide wasn’t exactly in its favor, AT&T decided to forestall its battle with the FCC and focus on the DOJ lawsuit, returning to the FCC with a fresh petition if it won that antitrust court battle. But the DOJ apparently doesn’t want to deal with AT&T’s divide-and-conquer tactics. Justice Department lawyer Joseph Wayland told U.S. District Court Judge Ellen Huvelle that AT&T’s request for an expedited trial was no longer valid since it technically has no merger application before the FCC, Dow Jones reported. Either AT&T and T-Mobile owner Deutsche Telekom need to re-file their FCC petition or withdraw their case; until then Huvelle should stay all proceedings, Wayland said.

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If the DOJ gets its wish, the deal could wind up in limbo, forcing AT&T to either go all the way or give up. According to the Dow Jones report, AT&T lawyers maintained they weren’t “playing some strategic game,” but Huvelle’s sympathy seemed to lie with the government. If the February trial date is postponed, then AT&T and DT will start bumping into their own self-imposed deadlines. Stifel Nicolaus telecom analyst Christopher King explained in a research note:

If, however, the trial is put off for a significant period of time, we believe that could put more pressure on T-Mobile (i.e., Deutsche Telekom) to reconsider its options and possibly seek to call off the merger, though it would still have to renegotiate a $4 billion break-up fee and spectrum concession with AT&T to withdraw early. The current deal runs through March 20, 2012; either party can unilaterally extend the deal three months, and a second extension is possible through September 20, 2012, though it requires a company certification to be made about the material chance of completing the deal in time.

AT&T-Mo isn’t dead yet, but the deal is facing increasingly unfriendly reception wherever AT&T looks. The FCC has condemned the deal though it never got a chance to vote on it. The DOJ appears to be in no mood to negotiate terms with AT&T, and the federal judge overseeing the trial is questioning AT&T’s methods. The deal still faces separate antitrust lawsuits from Sprint(s S) and C Spire. Meanwhile AT&T faces an onslaught of public criticism. DT may decide in March to cut and run, taking as much of the break-up it can wrangle from AT&T.